07 September 2016
The European Union (Statutory Audits) Regulations 2016 (the Regulations) came into effect on 17 June 2016. This new legislation gives effect to an EU Audit Directive and a directly effective regulation, the aim of which is to improve the quality of statutory audit across EU Member States.
The new regime applies to financial years that commence after 17 June 2016. For financial years commencing before that date, the old rules as set out on the European Communities (Statutory Audits) Regulations 2010 will continue to apply.
Key measures which apply to all statutory auditors and audit firms include:
Stricter requirements apply to the statutory audit of public-interest entities (PIEs), that is, listed companies, credit institutions and insurance undertakings. This is due to the systemic importance of such entities and the likely negative impact that audit failings in these entities would have on the wider economy. The stricter requirements include:
It is likely that the impact on PIEs in particular will be considerable as they will now have to consider not only auditor rotation but also the extent of non-audit work being carried out by their statutory auditor.